Cash flow information: Direct and indirect methods The comparative year-end bala
ID: 2374919 • Letter: C
Question
Cash flow information: Direct and indirect methods
The comparative year-end balance sheets
20X5
20X4
Increase / Decrease)
Current assets
Cash
$55,400
$35,200
$20,200
Accounts receivable (net)
83,800
88,000
-4,200
Inventory
243,400
233,800
9,600
Prepaid expenses
25,400
24,200
1,200
Current liabilities
Accounts payable
$123,600
$140,600
($17,000)
Taxes payable
43,600
49,200
-5,600
Interest payable
9,000
6,400
2,600
Accrued liabilities
38,800
60,400
-21,600
Note payable
44,000
%u2014
44,000
SIGN GRAPHICS INC.
Income Statement
for the Year Ended December 31, 20x5
Sales
$713,800
Less: Cost of goods sold
323,000
Gross profit
$390,800
Less: Selling & administrative expenses
$186,000
Depreciation expense
17,000
Interest expense
27,000
230,000
Add: gain on sale of land
$160,800
21,800
Income before taxes
$182,600
Income taxes
36,800
Net income
$145,800
Other data:
Instructions:
Prepare the investing and financing activities sections of the statement of cash flows.
20X5
20X4
Increase / Decrease)
Current assets
Cash
$55,400
$35,200
$20,200
Accounts receivable (net)
83,800
88,000
-4,200
Inventory
243,400
233,800
9,600
Prepaid expenses
25,400
24,200
1,200
Current liabilities
Accounts payable
$123,600
$140,600
($17,000)
Taxes payable
43,600
49,200
-5,600
Interest payable
9,000
6,400
2,600
Accrued liabilities
38,800
60,400
-21,600
Note payable
44,000
%u2014
44,000
SIGN GRAPHICS INC.
Income Statement
for the Year Ended December 31, 20x5
Sales
$713,800
Less: Cost of goods sold
323,000
Gross profit
$390,800
Less: Selling & administrative expenses
$186,000
Depreciation expense
17,000
Interest expense
27,000
230,000
Add: gain on sale of land
$160,800
21,800
Income before taxes
$182,600
Income taxes
36,800
Net income
$145,800
Other data:
- Long-term investments were purchased for cash at a cost of $74,600.
- Cash proceeds from the sale of land totaled $76,200.
- Store equipment of $44,000 was purchased by signing a short-term note payable. Also, a $150,000 telecommunications system was acquired by issuing 3,000 shares of preferred stock.
- A long-term note of $49,400 was repaid.
- Twenty thousand shares of common stock were issued at $5.19 per share.
- The company paid cash dividends amounting to $128,600.
Instructions:
- Prepare the operating activities section of the company's statement of cash flows, assuming use of:
- The direct method.
- The indirect method.
Prepare the investing and financing activities sections of the statement of cash flows.
Explanation / Answer
operating activity using indirect method
net income 145800
add:non operating items
Depreciation 17000
Less
gain on sale of land (160800)
Add/less working capital
less:inventory (9600)
Prepaid Expense (1200)
Accounts payable (17000)
Taxes payable (5600)
accrued liability (21600)
Add:
Accounts receivable 4200
interest payable 2600
note payable 44000
total (2200)
Financing activity
Common stock 103800
Dividend (128600)
Total - 24800
Investing activity
Long term investment (74600)
cash proceeds 76200
Long term note (49400)
Total -47800
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